April is by far the biggest month of the year for state tax revenue collections, as taxpayers all over the state file their income tax returns during the month, so it's closely watched for signs of the health of the overall state budget. The numbers are in now, and April's collections beat the forecast, coming in a scant $500,000 above but bringing the year-to-date surplus - the amount collected over the state's forecast for the year - to just over $37 million. That's for the 2012 fiscal year, which runs through July 1. Among the drivers of the April surplus was the sales tax, which was up 6.3 percent from the same time last year; and miscellaneous taxes, which are up significantly due to strong interest earnings, a settlement with a drug company and high collections from the mine license tax. Both individual and corporate income taxes were below forecast for the month, but both remain ahead of forecasts for the fiscal year to date.

You can read the state Division of Financial Management's April revenue report here, and the Legislature's April Budget and Revenue Monitor here. This is the fifth straight month that Idaho's state tax revenues have exceeded forecasts, and lawmakers budgeted below the forecasts. State lawmakers set the current year's budget assuming just 3 percent growth in state revenues; instead, it's been more than 5.7 percent. That means a big and growing year-end surplus this year, which lawmakers have decided should go directly into the state's rainy-day fund. With the current numbers, nearly $60 million will go into the state's Budget Stabilization Fund on July 1.

Idaho's former longtime chief state economist, Mike Ferguson, has released a 20-page report on public school funding that reaches a series of startling conclusions: Public school funding, as a share of total state spending, has dropped dramatically since 2000. Even as state lawmakers in 2006 eliminated the key property tax levy for school operations while raising the state's sales tax by a penny, schools that saw decreasing state funding have turned increasingly to property tax levies, which, unlike the levy eliminated in 2006, are no longer “equalized” with state funding and accentuate disparities in wealth among the state's school districts. The result: Idaho's current school funding system may be violating two key provisions of the state Constitution, requiring the Legislature to “establish and maintain a general, uniform and thorough system of public, free common schools” and requiring taxes to be imposed uniformly. You can read my full story here at spokesman.com.

“Actions that drive local school districts into making dramatic increases in the use of local property tax resources … raise serious doubt that the Legislature is fulfilling its Constitutional obligations,” Ferguson wrote. “It is probably not realistic to expect a quick fix. It is reasonable to expect an open and honest discussion of the direction of Idaho's public school funding, and whether it is living up to the duties and responsibilities handed down by Idaho's founding fathers. Hopefully this report will contribute to that discussion.”

You can read the full report here; it explores Idaho's public school funding from 1980 to 2013. Among the figures revealed by its analysis: Idaho spent 34 percent of its state spending on public schools, on average, in the 1980s and 1990s; that had dropped to 26 percent by fiscal year 2012. The share of Idaho's personal income that went to schools - which Ferguson describes as Idaho's “funding effort” for schools, or “the share of our aggregate income invested in our children,” dropped from a steady 4.4 percent average in the '80s and '90s, and 4.4 percent in fiscal year 2000, to 3.5 percent in fiscal 2012; in the governor's executive budget for 2013, it fell to 3.4 percent. Ferguson noted that's a 23 percent decline, a change he called “a stunning reduction in the state's commitment to public schools.”

And more than two-thirds of Idaho's school districts now have supplemental property tax levies, which are voter-approved local taxes that raise sharply varying amounts from one district to the next, depending on the local tax base. Even after the elimination of the major operations levy in 2006, “Considerable amounts of public school funding are still derived from property taxes, and the relative share is once again increasing,” he wrote.

Ferguson is now director of the Idaho Center for Fiscal Policy, a non-profit, non-partisan grant-funded organization whose mission is “to provide Idaho citizens and elected officials with fact-based information and analysis they can use to make informed public policy decisions.”
  

March was the fourth straight month that state tax revenues came in ahead of forecast, running $3.9 million ahead, according to the latest figures. For the fiscal year to date, that puts the state $36.6 million ahead of projections. Among the strong spots: Sales taxes and individual income taxes. That brings state tax revenue growth to date for the fiscal year to 5.5 percent, well above the predicted 3.3 percent. You can read the state Division of Financial Management's monthly General Fund Revenue Report here, and the legislative budget office's General Fund Budget Monitor here.

The legislative monitor notes that that latest figures push Idaho tax revenue to $91.7 million more than last year at this time. The result, given HB 702, which passed this year and transfers any additional surpluses at the end of fiscal year 2012 into the Budget Stabilization Fund, will be larger deposits into that reserve account, up to nearly $60 million.
  

Senate Finance Chairman Dean Cameron, R-Rupert, said despite the positive budget outlook lawmakers are facing with state revenues growing, he doesn't feel like the state's in surplus mode, with its revenue still below 2008 levels. “From my way of thinking, a surplus is when you have paid all your bills and you have money left over,” he said. “We're not at that point. We haven't paid all our bills.” He pointed to tens of millions that state hospitals and nursing homes assessed themselves to help Idaho keep its federal Medicaid matching funds this year, and automatic salary fund reductions built into the public school budget going years out into the future. “That in my mind should be paid for,” he said. “So in my mind, we're not operating with a surplus.”

Said Cameron, “I guess early on I cringed at all the jubilation. … I'll be happy when we get back to revenues growing at a reasonable pace,” and ground lost since 2008 has been made up. “Then I'll breathe a sign of relief. Until then, it's more pain, it's just in degrees of agony.”

Idaho's longitudinal data system for public schools is working better now, JFAC members were informed today. After the big data upload in November to calculate school enrollment, legislative budget analyst Paul Headlee said the state Department of Education is reporting that 141 school districts or charter schools submitted error-free data, out of 159; that's up from just nine the previous year. “So it appears that there's been quite an improvement in the quality of the data that's being submitted from the school districts to the department,” Headlee said.

Sen. Bert Brackett, R-Rogerson, noted, “The state spent millions on this longitudinal data system.” He asked how much school districts have spent. Tom Taggart, president of the Idaho Association of School Business Officials, said, “It's going to be an ongoing burden on the districts. It'll become less so after we've worked it out and accommodated it. I know in our district we've had five people directly involved and put hundreds of hours into it.”

Idaho's various reserve funds hit a high of $393 million total at the end of fiscal year 2008, but now they're projected to be at $30.4 million by the end of the current fiscal year on June 30. That includes the unendowed portion of the Millenium Fund, which comes from tobacco proceeds; the economic recovery reserve fund, which basically has been spent all the way down; the public education stabilization fund, which had $11 million on June 30, 2011, and is projected to have $15.5 million by the end of this fiscal year; the budget stabilization fund, also spent down; and the governor's emergency funds, which stand at $3 million.

Legislative budget analyst Ray Houston told JFAC, “It took you five years to get up to $400 million, and it took you four years to get down to $30 million.”

Senate Finance Chairman Dean Cameron noted that if lawmakers consider raises for state employees - known as CEC, or “change in employee compensation” in budgeting speak - the “Students Come First” school reform laws could complicate that when it comes to public schools. That's because the laws require a shift of 2.38 percent out of salary funds next year to fund technology boosts and teacher merit-pay bonuses.

“We know the governor, at least at this point, has recommended about a 3 percent CEC,” Cameron said. “One of the dilemmas we have is if you apply that to public schools, if they have 3 percent CEC and at the same time a 2.38 percent reduction, that won't translate to a 3 percent for public schools. We have to keep in mind how to work through that. … There may be a perception issue that there may be more revenue there than will be available.” Legislative budget director Cathy Holland-Smith responded, “That's correct.”

As Idaho lawmakers begin to plan for setting the fiscal year 2013 budget, they'll have a beginning balance left over from the current year, because state tax revenues came in so far above the amount for which they budgeted. Under current revenue forecasts, that'll be $130.3 million, legislative budget director Cathy Holland-Smith told JFAC this morning. “This $130 million … assumes that the revenue forecast will stay,” she said. “I think we can all assume that it will go down.”

Then, if state revenues next year grow by a hypothetical 3 percent, $26 million is automatically transferred to the state's budget stabilization fund, the next $15 million bump in the grocery tax credit is funded, and non-discretionary adjustments are covered to keep state services at their current level, lawmakers could cover all costs and still have $79.3 million left over. State agencies have submitted $147 million in requests for new line items vying to be funded from that pot next year, including restoring cuts; other potential uses include pay hikes for state employees who've long gone without; further replenshing drained rainy-day funds; or other moves. “It's going to be the call of the Legislature,” Holland-Smith said.

If state tax revenues next year grow by 4 percent rather than 3 percent, the amount available after covering costs for current service levels grows to $105.4 million. If it's 5 percent, the amount grows to $131.4 million.

“It really is good news, but it's cautionary, because there is a significant pent-up demand,” Holland-Smith said.

Legislative budget director Cathy Holland-Smith noted that there are differing views of the $16.2 million that state tax revenues have lagged behind forecasts since the start of the fiscal year on July 1. Though that's only a 1.6 percent shortfall from the forecast, and lawmakers budgeted well below the forecast, it suggests that “that revenue forecast is not going to hold,” she said.

“Right now, on paper, there's $160 million … of additional revenue that's available compared to when you budgeted,” she told lawmakers on the Joint Finance-Appropriations Committee. If Idaho then covered the $4.2 million in deficiency warrants that have been run up for fires and pest control, and funded all $30 million in supplemental budget requests for the current year that have come in, lawmakers still would have a $127.2 million surplus as they begin their budget-setting task for next year, if revenue continues to come in as predicted in the August state forecast.

“That's not likely to happen,” Holland-Smith said. Rather than growing by 6.4 percent, she said it's now looking like state revenue may grow at 4 or 5 percent, so the forecast could be revised. “It's likely that you're going to begin to see that pushdown,” she said. Because every 1 percent of the state general fund is $26 million, “You can quickly see where that would change,” she said. “We'd be probably right in the (range of) $50 million off of that $127 million surplus.”

That would leave lawmakers with a $77 million state budget surplus.

Every member of the Legislature's Joint Finance-Appropriations Committee has turned out for today's interim meeting, where the first agenda item is a general fund update. JFAC Co-Chair Dean Cameron, R-Rupert, told legislative budget director Cathy Holland-Smith that the lawmakers are looking forward to hearing about all the extra money the state's going to have.

The Legislature's General Fund Monitor for November is out, and it puts into perspective the November state tax revenues, which came in $5.4 million below projections, making a cumulative shortfall below projections for the fiscal year to date of $16.2 million, or 1.6 percent. Lawmakers budgeted for well below the projected amounts, however. What the numbers mean: Idaho is looking at a year-end surplus of roughly $156.7 million in its general fund.

That's the difference between the ending balance lawmakers expected to have at the end of the fiscal year and the amount they're now projected to end up with, if the Legislature covered all fire, hazard and deficiency costs already incurred. It doesn't take into account supplemental budget requests for the current year that lawmakers will consider when they convene in January, but those total only about $30 million. You can  see the November General Fund Monitor here.
  

Idaho Gov. Butch Otter is sounding a cautionary note, after November state tax revenues came in $5.4 million below projections, for a cumulative year-to-date shortfall vs. projections of $16.2 million; that's 1.6 percent below the forecast. Since lawmakers and the governor budgeted for spending well below the projected amounts, there's no shortfall, but Otter's warning that projected big budget surpluses could shrink. “The more probable scenario is for both FY 2012 and FY 2013 to continue to be years of limited growth that will require us to be very selective in the authorization of new General Fund spending,” he wrote today in a letter to members of his cabinet. You can read the monthly general fund revenue report here.
  

Representatives of Idaho universities were given an opportunity to respond to the new higher ed funding equity report, and while all praised the work that went into the report, each had a different perspective on the funding equity issue; click below for a full report on the issue from AP reporter John Miller.

J. Anthony Fernandez, president of Lewis-Clark State College in Lewiston, said, “Whatever system comes out of this work, we hope it would be fair and equitable for all students, regardless of what their choice of school is and what discipline they decide to pursue.” He said, “We have some questions about some of the weights that are given … and the formulas … in the current enrollment workload adjustment. But that's not the issue here. The issue is … fairness for our students.” He added, “Nothing is going to be perfect, we realize that, but always keep in mind the students.”

BSU President Bob Kustra said he's worked in other states where funding equity never was at issue, because appropriate formulas were in place. “I don't think we should lose sight of the fact that we have a formula,” he said. It may not be perfect, he said, but “it works. And the Legislature chose in certain recent years not to fund it, putting in peril certain universities who were growing during these last few years.”

Kustra noted that 71 percent of the new students to enroll in Idaho public universities since 2007 came to Boise State. “We're not here to ask for any more than I think what we rightfully deserve,” he said. “The Legislature did not fund the formula.”

ISU President Arthur Vailas said costs for providing health education programs like those at ISU have grown more than other types of inflation. And University of Idaho representative Marty Peterson noted that UI awards a greater percentage of its degrees in science, technology, mathematics and engineering than other state institutions, and that those programs are more costly to provide.

Mike Rush, executive director of the state Board of Education, said he agreed with Rep. Maxine Bell that it's “certainly the board's job to get this done.” He said the board “didn't ignore” the issue, and did sign on to the 2005 agreement. “They may not have solved every problem, but they've made an effort,” he said. “They've also made continuing efforts.”

The new report from the state Office of Performance Evaluation draws no conclusion as to whether there's inequity or not currently in higher ed funding in Idaho, concluding instead that the state Board of Eduction should determine what really constitutes equity, and that Idaho currently lacks such a definition. “Each institution has a different mission,” said evaluator Lance McCleve. “Each institution has a unique student body that they are providing for.” Funding levels are “expected to be different,” he said, but that “doesn't mean all differences are justified.”

Rep. Maxine Bell, R-Jerome, co-chair of the Legislature's joint budget committee, commended OPE for the report. “This is a policy, this should be policy,” she said. “It has nothing to do with funding.” She noted that when the state reached agreement about funding equity in 2005, “At that time we did do some additional funding.” But, she said, “I can tell you right now that there will be no additional money to put in as there was at one time from this effort, so it's going to have to come from the existing funds.” Bell said she thought back in 2005 that the state board was going to be examining standards for equity and following up on that. “If they'd have done what they said they would do in the ensuing years since 2005, there would be a plan and some equality,” she said.
  

The Joint Legislative Oversight Committee is meeting this afternoon, and has just received a report from the state Office of Performance Evaluations on equity in higher education funding, long a thorny issue as state colleges and universities have jockeyed for scarce state funds. “It's an issue that goes back for at least three decades,” evaluator Maureen Brewer told the lawmakers, “a deeply political issue.” The goal of the report is to avoid the politics and provide objective information, she said.

Among the findings: Differences in general fund dollars per weighted full-time equivalent student are larger now than they were in fiscal year 2001, when the state last declared the funding inequitable, and also are larger than they were in 2007, when the state officially declared the inequities addressed in a settlement. Further, though there's a perception that the Legislature was to resolve inequities in part by funding an annual enrollment workload adjustment for each institution, that adjustment hasn't always been funded, and even if it had been, “it would not have resolved the differences seen,” Brewer said.

Representatives of the University of Idaho, BSU, ISU and LCSC are here to participate in the meeting.

Idaho's Department of Environmental Quality has lost a quarter of its budget  to cuts since the recession began, AP reporter John Miller reports, and it's part of a national trend that's seeing conservation programs and environmental regulations pared back significantly as states grapple with budget deficits. Miller reports that because environmental programs are just a sliver of most state budgets, the cuts often go without much public notice, while more attention is focused on larger reductions in Medicaid, public education or prisons. Click below for his full report.

Idaho Gov. Butch Otter has sent out a guest opinion entitled, “Leaner, more focused government must be our new normal,” that already has appeared in the Capitol Hill newspaper “Roll Call,” in which he says Idaho sets “an example of responsible governance for the rest of America.” Otter says the state did that by not raising taxes and balancing its budget. “It wasn't easy, and it wasn't always popular,” he writes. Click below for his full opinion piece.

Idaho's general fund revenues for October are in, and they're almost exactly on target, missing the forecast by just 0.7 percent. At $209.9 million, the month's tax take is $1.6 million below the $211.4 million forecast. That's because sales taxes came in $4.1 million below the expected level, but all other categories came in ahead of the forecast. Individual income tax revenues for October were 5.9 percent above October of the previous year; the forecast was for 4.9 percent growth. Sales taxes were up 1.6 percent over the previous October; the forecast had called for 6.3 percent.

For the fiscal year to date, which started July 1, Idaho revenues are very close to the forecast level, falling 1.3 percent below it. You can see the full monthly general fund revenue report here.
  

Idaho lawmakers are facing something they haven't seen in years: A 'manageable' budget. When they convene in January, they'll likely be able to balance next year's state budget without further cuts, and even make up some cuts and start refilling the state's drained reserve funds, according to figures unveiled Tuesday. They're still wary, however. “We'll certainly know a little bit more by the time the legislative session begins,” said Senate President Pro-Tem Brent Hill. “It's a long ways from where we were five years ago, but at least it shows we're headed in the right direction.”

After legislative budget chief Cathy Holland-Smith briefed Idaho's Legislative Council on budget scenarios including one assuming 3 percent revenue growth next year, state Legislative Services Director Jeff Youtz, a former longtime legislative budget chief, said he was struck by the fact that the scenarios all showed Idaho easily covering its costs next year, without having to dip into reserves to balance the books. “We haven't been able to do that in three years. We have some options,” Youtz said. “We've got a manageable budget situation.” Said Wayne Hammon, Gov. Butch Otter's budget chief, “We still have a lot of work to do on the budget, but it's not going to be as painful as it's been.” Otter's looking as possibly restoring some cuts to education and addressing hard-hit state employee compensation. You can read my full story here at spokesman.com.
  

Idaho's Legislative Council, the joint committee that handles the business of the Legislature when it's not in session, today voted down a proposal to add back two legislative staff positions to partially make up recent years' cuts. Legislative Services Director Jeff Youtz presented a request to add one budget analyst; there currently are six, down from the usual eight; and one legislative auditor, as that division is down three auditors from its level five years ago. Legislative Audits Division chief Don Berg explained that audits of state agencies take a certain number of hours, and they have to be done and done by certain deadlines; with less staff, auditors have to work overtime, and the cost ends up the same as adding back a position.

Rep. George Eskridge, R-Dover, said, “I'm hesitant to approve an increase beyond the status quo. … I would remind us, we're not cutting anybody, we're just talking about adding two new employees. … Although we recognize the workload of our staff, I still maintain we're growing government at a time we don't have an increase in our economic recovery.”

Sen. Nicole LeFavour, D-Boise, said, “We've been cutting staff and cutting government for more than four years now, since the very beginning of this recession. … Some of the cuts in fact don't save us money. … I think we have to be smart about this.” But Sen. Jim Hammond, R-Coeur d'Alene, said, “I recognize the challenge that the LSO personnel have in serving all of our needs, but at the same time I don't see a budget coming forth that's going to allow for anything but an MCO (maintenance of current operations) budget, and I would move for an MCO budget, maintenance of current operations.” Rep. John Rusche, D-Lewiston, offered a substitute motion to approve the new staffers, but it died on a voice vote, and Hammond's motion passed.

The final decision will be made by JFAC when it sets budgets. Youtz said, “Whatever the Legislature ends up giving us, we'll make it work for you and make it work well. Thanks for the discussion.”